WASHINGTON (Reuters) — The U.S. Postal
Service could improve its financial stability if it started offering
financial services such as debit cards, small loans and
check-cashing, a postal agency watchdog said on Monday.

The U.S. Postal Service Office of Inspector General said that the
struggling mail carrier could tap into the 68 million American
adults who are under-banked and spend billions of dollars every year
on non-traditional services such as payday loans.

This could bring in an additional $8.9 billion in revenue annually
to the agency, if just 10 percent of those under-served turned to
the Postal Service.

"While banks are closing branches all over the country, mostly in
low-income areas like rural communities and inner cities, the
physical postal network is ubiquitous," the inspector general's
office said in its paper. "The Postal Service also is among the most
trusted companies in America and trust is a critical element for
implementing financial services."

Rather than compete, the office said, the Postal Service could
partner with banks to gain expertise in those services.

Postal services in other countries including France, UK and New
Zealand provide financial services, which are a substantial source
of their revenues.

The U.S. Postal Service offered financial services from 1911 to
1967, but when interest in those services faded Congress ended the
program. The agency currently offers money order and international
money transfer services.

The Postal Service has been plagued by financial troubles as more
Americans pay their bills and communicate electronically instead of
sending stamped mail, and as it struggles to pay into a health fund
for its future retirees, as mandated by a 2006 law.

The agency, which lost $5 billion in 2013, has sought legislation
that would relieve the pressure of the massive retiree payments,
shift to a five-day mail delivery service, close some rural post
offices and allow it to modernize its business service offerings.

To raise revenue, the mail carrier recently entered into a
potentially lucrative partnership with online retailer Amazon.com
Inc <AMZN.O> to deliver packages on Sundays, and to sell its
services out of Staples Inc <SPLS.O> office supplies retail stores.

On January 26, the mail carrier also raised its prices for stamps
and direct-mail services, but it faces backlash from the mailing
industry. The Association of Magazine Media, the National Postal
Policy Council, the Envelope Manufacturers Association and Greeting
Card Association have jointly filed an appeal to overturn the price
changes.

Adding financial services, report said, would help partly close
financial gaps and also keep the Postal Service relevant.

"There is a clear market need for innovative financial products, and
millions of families would benefit from more affordable solutions.
Postal Service could be exactly what they are looking for," report
said.